NexPoint Residential Trust Inc (NXRT) 2018 Q3 法說會逐字稿

Good day, and welcome to the NexPoint Residential Trust, Inc. Third Quarter 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Marilynn Meek. Please go ahead.

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the third quarter ended September 30. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at www.nexpointliving.com.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can also be identified by words such as expect, anticipate, intend and similar expressions and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NexPoint's strategy and guidance for financial results for the fourth quarter and full year 2018, expected acquisitions and dispositions and the expected redevelopment of units. They are not guarantees of future results and are subject to risks, uncertainties, assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement.

Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements. Except as required by law, NexPoint does not undertake any obligation to publicly update or revise any forward-looking statement.

This conference also includes analysis of funds from operations, or FFO; core funds from operations, or core FFO; adjusted funds from operations, or AFFO; and net operating income, or NOI, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to and not a substitute for net income loss computed in accordance with GAAP. For a more complete discussion of FFO, core FFO, AFFO and NOI, see the company's earnings release that was filed earlier today.

I would now like to turn the call over to Brian Mitts. Please go ahead, Brian.

Thank you, Marilynn, and thank you to everyone joining us today for NXRT's 2018 third quarter conference call.

Today, we will discuss highlights of the quarter, present our Q3 2018 and year-to-date results, revise guidance for the remainder of 2018 and discuss the portfolio and the markets. I'm Brian Mitts, Chief Financial Officer, and I'm joined as always by Matt McGraner, Executive Vice President and Chief Investment Officer.

We're reporting another very solid quarter with a same-store NOI increase of 8.3% for the third quarter 2018 as compared to the third quarter of 2017 and year-to-date same-store NOI increase of 9% as compared to the same period in 2017.

We're reporting same-store revenue increases of 4.7% for the quarter and 4.3% for the year, and core FFO for 2018 through September 30 is $0.20 higher than the same period in 2017 or a 20% increase.

Total revenues year-to-date were down 1.9% versus the same period in 2017. But despite that, NOI increased by 2.8%, and we achieved the NOI margin of 55% year-to-date through September 30 versus 52% for the same period last year. We continued to execute our business plan by renovating 439 units during the quarter and have completed 1,116 renovations for the year through September 30.

After being quiet this year on the acquisition front through July, we had a busy quarter closing 3 acquisitions in the last 6 weeks of the quarter and completing 6 refinancings that lowered our spread and provided proceeds to partially fund the acquisitions. Yesterday, our stock closed at $35.03 per share, which was a 4% premium over our newly disclosed NAV midpoint of $33.75 per share.

With that, let me take you through some of the highlights and details of our activity results for the third quarter and year-to-date. As mentioned, we acquired 3 properties during the quarter. Two of these properties were located in Nashville, totaling 842 units at $106 million total purchase price. One property is located in Dallas with 242 units and a $25 million purchase price. To partially finance these acquisitions, we completed 6 refinancings in the third quarter. And together with the one refinancing we completed in the second quarter, we extracted $29.5 million of proceeds that we applied towards the acquisitions and lowered the financing spread on those mortgages by 54 basis points.

As discussed, we completed 439 units, rehab units, in Q3, achieving an ROI of 25.4%. Inception-to-date within the current portfolio, we've completed 5,345 units at an average cost of $5,033 per unit. On those rehabs, we've achieved average rent growth of 10.8% or $95 per unit and achieved an ROI of 22.6%, helping to fuel our NOI and core FFO increases.

We saw strong growth in new leases and renewals for the quarter, with new lease growth at 4.5% across the portfolio with Orlando coming in at super-hot 13.2%. And we saw renewal growth of 4.7% across the portfolio, and Matt will provide additional details in his comments on these stats. Based on some updates in cap rates and NOI growth, we're revising our NOI range upward as follows: On the low end, $29.36; on the high end, $38.13; for a midpoint of $33.75, which compares to a midpoint of $31.21 that we disclosed last quarter or an 8% increase.

To reflect the growth in core FFO, yesterday, the board declared a Q4 dividend of $0.275 per share, which is a 10% increase over the prior dividend amount. Since our first dividend after going public in April 2015, we've increased our dividend 3x by a total $0.069 per share or 33.5%, keeping in line with our goal to maintain an approximately 65% payout ratio on core FFO.

After aggressively buying back shares in Q1 and Q2, we had no repurchases in Q3 as our stock has traded at or near premium this quarter. We completed no dispositions this quarter, and have only completed one for the year.

Let me turn to the financial results for the third quarter and year-to-date. Q3 results are as follows: Total revenues were $36.5 million for the third quarter of '18 as compared to $37.1 million for third quarter of '17, a decrease of 1.6%. Net income was negative $5.2 million or negative $0.25 per diluted share. In the third quarter of '17, net income was $53.9 million or $2.51 per diluted share. NOI for the third quarter of 2018 was $20 million as compared to $19.5 million for the same period in 2017, an increase of 2.3%. Core FFO for the third quarter was $8.9 million or $0.42 per diluted share as compared to $7.5 million or $0.35 per diluted share in 2017.

Q3 same-store results were as follows: The Q3 same-store pool was comprised of 31 properties and 11,091 units. Same-store rent increase was 4.9%. Same-store occupancy dropped 20 basis points from 94% in Q3 of 2017 to 93.8% in the third quarter of '18. Same-store revenue increased from $33.1 million in the third quarter of '17 to $34.7 million in the third quarter of '18 or a 4.7% increase. Same-store expenses were up slightly to $15.7 million from $15.6 million or a 0.7% increase, driving same-store NOI at $19 million, which is an increase of 8.3% over Q3 of '17, which was $17.6 million.

Year-to-date results are as follows: Total revenues for 2018 through September 30 were $107.2 million versus $109.3 million in the same period of '17, which is a decrease of 1.9%. Net income fell to $3.2 million, which is $0.15 per diluted share from $57.7 million or $2.70 per diluted share, driven mostly on gains from sales in 2017.

NOI was $58.9 million year-to-date for 2018 versus $57.3 million in '17 or 2.8% increase. Core FFO was $25.9 million or $1.21 per diluted share versus $21.7 million and $1.01 per diluted share in 2017.

Year-to-date same-store results are as follows: The pool consisted of 29 properties and 10,123 units. Same-store rental increase was 4.6%. Same-store occupancy dropped 40 basis points from 94.2% in 2017 to 93.8% in 2018. Same-store revenue increased to $92.3 million from $88.6 million or a 4.3% increase. Same-store expenses were down slightly to $41.6 million from $42 million in the same period of '17, a 1% decrease. These results drove same-store NOI at $50.8 million for 2018 through September 30 versus $46.6 million in 2017 or a 9% increase.

Let me turn to revised guidance before I turn it over to Matt. We're revising and reaffirming 2018 full year guidance as follows: Net income per share on the low end, minus $0.08; the high end, minus $0.02; for a midpoint of negative $0.05, which is compared to our prior estimate of $0.10 per share. Core FFO per share on a diluted basis, on the low end, $1.64; on the high end, $1.70; for a midpoint of $1.67, which is an increase from our prior estimate of $1.66. Same-store rental income, we're keeping the same, low end, 4.8%; high end, 5.8% increase; for a midpoint of 5.3% increase over 2017.

Same-store revenue, also keeping the same, a 5% increase on the low end, a 6% increase on the high end, with a midpoint of 5.5%. We're revising our same-store expenses lower to 1% on the low end, 2% on the high end, with a midpoint of 1.5%, which is a -- which compares to 2.5% decrease from the prior quarter. Same-store NOI, we are increasing to 7% on the low end, 8.5% on the high end, with a midpoint of 7.8% which compares to our prior estimate of 7%.

So with that, let me turn it over to Matt to discuss the portfolio and markets.

Thanks, Brian. I'll begin with a review of our same-store results by market, as I usually do on the call.

Our same-store results for Dallas came in at 11.9%. Our same-store results for Houston came in at 23.3%.; D.C. Metro grew at 6.3%.; Atlanta was down 3.8%, primarily due to a tax reassessment from Rockledge acquisition, which we'll discuss later; Nashville grew by 6.1%.; Charlotte grew by 70 basis points; Phoenix grew by 9.7%; West Palm Beach grew by 9.3%; Orlando was up 14.4%; and Tampa was up 10.5%.

As Brian mentioned, leasing activity and revenue growth continues to outperform with 6 of our 10 markets achieving new lease growth of at least 6.7% or better. Our top-5 markets are: Orlando at 13.2%, Phoenix at 9.5%, West Palm Beach at 7.5% and DFW and Tampa each delivered 6.8%.

Effective renewal rent accelerated from Q2 was up 80 basis points to 4.7%, with 9 out of 10 markets delivering growth of 4.1% or better. Renewal conversions also remained steady from Q2 at 53.2%.

As Brian mentioned, we were busy this quarter on the transaction front. In late August, we acquired Cedar Pointe, a 210-unit property built in 1998 that is directly adjacent to Beechwood Terrace in Nashville, another property that we own. Cedar Pointe has 1,000 square-foot units. And as Brian mentioned, we paid $26.5 million for it, and that equates to a 5.5% year 1 economic cap rate. The plan is to operate -- immediately operate Beechwood and Cedar together, which we think we can pick up 200,000 in annual NOI synergies. We also plan to upgrade approximately 110 units over the next 3 years and achieve an average annual rent growth of 12.3% on those rehab units.

In late September, we acquired Brandywine I and II in the Brentwood submarket of Nashville for approximately $80 million, equating to an economic cap rate of 5.25%. Built in 1995, Brandywine has 632 units, 230 of which we will upgrade over the next 3 years and achieve an average annual rental increase of 12.5%.

Also in late September, we acquired Crestmont Reserve, a 1988 vintage 242-unit property, again directly adjacent to another NXRT that we own, Versailles in Dallas, Texas, located in the highly desirable Plano independent school district. We purchased Crestmont for $24.7 million, which equates to a 5.9% year 1 economic cap rate. Again, here, the plan is to immediately operate Crestmont and Versailles together and to pick up approximately $300,000 in annual NOI synergies. We also plan to upgrade approximately 138 units over the next 3 years and achieve an average annual rent growth of 11%.

All these acquisitions share common themes with our past acquisitions. Brandywine, for example, is a check that didn't draw many bidders, and Crestmont and Cedar were particular accretive deals given the adjacent nature of the assets and other synergies from operating multiple assets together, each in highly desirable markets. In each case, these assets were purchased at a material discount replacement cost in our core markets with significant value-add upside through renovation and active management.

On capital recycling front, we have structured these assets to be reverse 1031 transactions, if necessary, and are actively evaluating opportunities to further recycle capital, particularly in Dallas where our NOI concentration is a bit outsized. In any case, we believe we could sell a couple of assets into an aggressive bid environment, where we can effectively recycle capital and achieve a 50 basis point cap rate or -- into the new assets and increase exposure to growth markets, such as Phoenix and Florida, where we are actively pursuing more opportunities.

As Brian mentioned, on our NAV table, as a result of our recent acquisitions, transaction activity, NOI growth and third-party surveys from Green Street Advisors, Axiometrics and CBRE, we've updated our NAV table to approximately $33.50 per share at the midpoint. The results of comps and feedback from market participants, which confirm in our view, is that cap rates are in and about 25 basis points for Phoenix and Atlanta markets for B product.

Phoenix multifamily transaction activity in particular is remarkably up 40% year-over-year as of the end of Q3. Year-to-date transaction activity in Phoenix a year ago was approximately $3 billion. According to CBRE, roughly $4.3 billion worth multifamily assets have already changed hands this year alone.

We expect Houston to also draw some interest in Q4 and into 2019. According to our research and MPF Research, 12,344 units will be delivered this year. This is well documented, but worth reiterating that in 2019, deliveries fall off a cliff just 4,000 units among 14 projects. And in 2020, that number only climbs by about 1,200 units to 5,200 units among 16 projects. The vast majority of our Houston exposure is in the Westchase submarket, which has 0 scheduled deliveries for the next 2 years and a projected annual rent change of 5% through the fourth quarter of 2019.

On the expense savings front, we again achieved material savings on utilities during the quarter through our green programs, yielding an improvement on same-store utility expense reductions of 890 basis points. We also plan to implement the Freddie Mac Green Up program at each of our new acquisitions starting in Q1 of 2018. And in addition, as I mentioned last quarter, we are actively implementing a program across 10 additional assets in 2,600 bathrooms as we speak and look forward to sharing those results over the next several quarters.

In closing, I'll just reiterate that leasing demand for upgraded but affordable housing is still very strong. Job growth and wage inflation, particularly for our rental cohort, is growing steadily. And we're also very excited about our new acquisitions and the opportunity to add another 500 units to our pipeline to upgrade over the coming quarters. Finally, as always, I want to thank our teams here at NexPoint BH for continued execution. Kick it back over to you, Brian.

Thanks, Matt. That concludes our prepared remarks, and we'll turn it over for questions.

(Operator Instructions) Our first question comes from Omotayo Okusanya of Jefferies.

Couple of questions from my end. The acquisitions for the quarter, the $119 million, I think, can you walk us through how you're funding it? Some of it, again, is proceeds from debt refis. Some of it is kind of going out to the line and term loans. But when we kind of think about longer-term financing and we kind of think about your leverage, how do you kind of think about equity being part of the mix?

I'll start on that and then Matt can jump in. I'd say we worked hard to create a good cost of capital, I think, where you see us trading today versus where we think NAV is. We have that cost of capital. We said kind of all along that we're looking to delever. We want to do it sort of naturally, not force it. I think clearly, as the value of the properties rise, we're delevering naturally that way. But I think going forward, to the extent that we can raise equity at or near NAV and have a good accretive use of the proceeds that will continue to earn, then we will start doing that. And through that, I think, over time, start to delever and use less leverage.

No, I was just going to say, adding to that, we do -- we will sell deals next year, particularly in Dallas where I mentioned we had a strong bid and can sell assets at a 5% cap and achieve an ARV. So that will be some of the mix regardless.

Okay. I guess, that makes a lot of sense to me. Just again, it feels like you are at the point where you do have that cost of capital. I mean, we have you kind of at an implied capital size 4 or so. So you're kind of there where you're buying deals accretively, you can definitely issue equity well above NAV. Just it kind of feels like it's the right time to kind of deleverage, just kind of given some investor concerns about your high leverage ratios.

Yes, which we appreciate and acknowledge. We're with you.

Okay. That makes sense. Then you also seem to indicate that you were still looking at -- pretty closely at Phoenix and Florida for potential new deals. I mean, are we meant to assume that you do expect more acquisition activity over the next few quarters?

Yes. I think, in particular, Phoenix is probably more likely than Florida, but we still are trying to purchase some assets in Florida. If you look at the markets that are outperforming, I mean, Orlando at 13.2% and 14.4% in same-store NOI growth is on fire. And so we obviously want more exposure there.

Phoenix is kind of a tale of a number of factors that are all positive. It's incredibly difficult to build affordable housing. You have job growth and wage inflation. And then, more helpful on the expense side, that's a state that's mandated -- or there's actually a law that caps real estate taxes at 5% annually, which we would love to have in Dallas, believe me. So I think, all of these factors, at least for the next couple of years, point to Phoenix being a very constructive B apartment market that we're focused on. And obviously, we already own there.

Okay. Last one from me. I mean, you seem to be getting a lot of benefits from the Freddie Mac Green project. And you kind of talked a little bit about rolling it out into more assets. Can you just kind of help us quantify at the end of the day, how much in regards to expense savings you do expect from this program? You talked about $16 a unit. Is that a fair number to kind of use going forward as the amount of operating expenses that may end up getting reduced over the course of '19 and '20 on a per-unit basis?

Yes. I mean, it's such a new program that it's hard to have any real data that goes back a material amount. But I think, that's a good run rate, number one. Number two is that we -- our average, according to the studies that we've done and the numbers that bears out is 32% savings from what it was before. So if you look at the utility spend and kind of apply maybe a little bit low 25% to 30% on those utility spend -- and this is obviously just on water, which we're looking to break out for investors and show more in granularity what that can actually deliver to the bottom line. But I think, that's a fair characterization.

Our next question comes from John Massocca of Ladenburg Thalmann.

Just looking at -- clearly, utilities was kind of a big driver of the kind of muted same-store operating expense increase. And was that all tied to the Freddie Mac program and kind of the water savings? Or was there something else rolling to that as well?

Yes. I mean, the significant -- the vast significant majority is tied to the water savings.

Okay. And then looking at the acquisitions, the 2 ones that were completed kind of adjacent to the existing properties, are those deals where, if they had not had the kind of savings associated with those -- with being adjacent to existing properties, would have completed? Or was that kind of a necessary part of those transactions? And how many other opportunities potentially are there out there like that?

Yes. It's a good question. I think we would have purchased Crestmont irrespective of the adjacency of Versailles. Versailles is one of our best-performing deals and has been for quite some time. Obviously being in Plano, that school district is a great value add. And Cedar, we've had a lot of success in that submarket of Nashville. And it actually helps, I think, both deals. I mean, they're -- just anecdotally, people get confused. Prospective renters have gotten confused over the years and actually went to Cedar Pointe's clubhouse when they were trying to rent a unit at Beachwood. So those just make a lot of sense, and we're probably more naturally -- we were more aggressive for Cedar because of the adjacent nature of it.

Makes sense. And then kind of on the financing side -- and apologies if I missed this. I hopped on a little late. This reduction in spreads on the mortgages, was any of that tied to this Freddie Mac Green program? Or was that just driven by a looser kind of -- or maybe lenders being a little bit more willing to post lower spreads?

Yes. It was -- they were all green. So when -- 2 things about the green program. Number one is, you get reduced spread. Typically, it's anywhere from 10 to 20 basis points. That business is then considered uncapped from the agency perspective, from the FHA cap. So it's kind of a win-win, both for borrowers -- win-win-win both for borrowers, renters and the agencies. So they're all green, and we'll continue to utilize that program.

And then one last one. I know -- I think I remember you saying on the call that Brandywine didn't have a ton of bidders for it. Was there some potential reason why? Or was it just fortuitous?

I mean, recall that our bread and butter over the years has been that equity checked in between kind of $25 million and $50 million, where below $25 million, you have a number of folks that can participate and earn back. And then above $50 million, you run into larger private equity firm. So having $80 million gross purchase price check kind of falls in between there, so that was -- there's just less people under the tent.

Our next question comes from Rob Stevenson of Janney.

The same-store real estate taxes and insurance line was down 5.3% year-to-date and 3.6% in third quarter, if my math is correct. How much of that's insurance versus the property taxes? Because most of your peers that have market overlap are seeing 5% to 6% increases in property taxes. Seems like you guys are moving in the other direction.

Yes. I think, Rob, some that is driven by -- we've been buying more actively in those markets, and we've seen some pretty aggressive reassessments from the counties and cities. And so we've been protesting those, and it takes a little while to go through the process there. And when we win -- and we do often or we get the city to come down, that flows through that current quarter and then in that current year. So you end up kind of getting a delayed reaction to it. I think that's why you see us getting those negative numbers or lower tax increases than some of the -- our peers.

On the taxes front, just to add to that, for example, with respect to Rockledge, which was an Atlanta property, we thought that we would get some savings, we didn't, but we'll set up next year our comp pretty well, we think. But in terms of where we saw the most savings were in these states like, as Brian mentioned, Arizona or Tennessee, where there's kind of a full year reassessment. We're just in between those periods where we're getting some benefit of that.

And then on insurance, we're excited about this renewal because we think we got hosed a little bit last year. And so we're looking forward to having some savings in 2019, because I think, our insurance was a little bit elevated relative to some of our larger peers.

When does that renewal hit?

We think probably February.

Okay. What was the cost per unit on the 439 units renovated during the quarter? I didn't see that in the release, just the program to date number. Do you have that?

I want to say it's right around -- yes, I think it's right around $5,100.

Okay. And then how much cost pressure are you seeing in that program on materials and especially labor on these renovations? Is that going to start to cut into returns? Or are you just able to pass that on to residents given the current market conditions?

I think the latter. If you look at our ROI this quarter, it is as high as it's ever been. And our expense was a little -- was up couple of hundred bucks. So we're pleased to see that.

The materials aren't really that big of an issue because they're bulk purchased by BH and they do a great job with that. It's really a function of the labor and then the timing. But I think, we feel like we can pass it on and that's evidenced by our numbers this quarter.

Okay. And then last one for me. Matt, given your comments about potentially selling some assets, what -- how big of a collection do you have in Dallas and elsewhere, where the value-creation opportunities are passed and they might be better owned by someone else going forward that you might elect to sell? Are we talking about 2 or 3 properties? Are we talking 5 or 10? And then how material is that number of stuff that you might want to sell?

I think it is 2 or 3 in Dallas, which have run the gamut and where we think that we've implemented the program and then can recycle the capital and diversify the NOI exposure. It's not 5 or 10. I mean, Dallas grew at 11.9% on same-store basis and it's still growing, growing like crazy. So we don't want to sell material now, but I think 2 or 3 in Dallas is likely for next year.

And then what about outside of Dallas within the portfolio, anything that's there?

Yes. I mean, we'll exit D.C. at some point. That -- for the Southpoint deal. But that's the only other thing I can think of now.

Our next question comes from Craig Kucera of B. Riley FBR.

I wanted to circle back to the acquisitions that you closed in the quarter and the cap rates you cited. Was that -- were those before those expected synergies? Or was that inclusive of those synergies and your economic cap rate?

Before.

Okay. Great. And as far as the incremental, the potential value-add units that you identified, is it reasonable to assume that those are probably somewhere in the $5,000 per unit level? Or could they be materially higher? Kind of what are your thoughts?

No, it is. Yes, we have active value-add programs going on in both Dallas and Nashville. And we've kind of mastered that cost per unit, so to speak. So it will be around $5,000. Maybe a little bit higher at Cedar, just because they're 1,000 square-foot units, but not materially so.

Okay. That's fair. And as far as the bridge loan, I believe it has the March 2019 maturity. Are there any extension opportunities on that? And kind of, I guess, are you thinking you're probably going to sell assets to pay that?

Yes, that's actually been recast. So it's just turned into a revolver. So that will -- we'll get an update out there on that, but it's a nonissue.

Okay. And I feel like you've been trying to sell Stoney Point (sic) [Southpoint Reserve at Stoney Creek] for a few quarters. Have you had any -- felt like you had some nibbles in the past but kind of -- look, the asset's performing well, and I think it's probably increased in value since you first started marketing it. But kind of what are you looking for potentially selling that asset for? And kind of what's the current marketing looking like?

Well, I think, we've waited this long, and not that tried to explore areas in D.C., but to the extent Amazon does announce that they'll go to D.C. or Northern Virginia, I think, we'll just -- we'll give it the rest of the year and then see where we go. But either way, we have active bids from adjacent guys that are on, whatever, in the market for $22 million, $23 million. So we're happy with that number. I mean, we'll make money. But it's one of -- I think a number at 22% or 23% but we think we'll give it -- we'll give Amazon the opportunity to announce D.C., and we'll see where that goes.

Got it. And as you think about this next 4, 5 quarters, you completed the 440 rehabs this past quarter. I imagine we'll see maybe a bit of a slowdown just given the season in fourth and first quarter. But is something in the range of maybe 1,500 in 2019, is that a good number as far as getting rehabs completed?

Yes. No, I think, that's really reasonable.

And a follow-up question from Omotayo Okusanya from Jefferies.

Just 2 quick ones there from me. The acquisition this quarter, I think you talked about yields on the redevelopment of about 11%. So just kind of curious why it's so much lower versus the kind of 20%-plus ROEs (sic) [ROI] you're currently getting at this point.

Yes. That's just a quoted average rental increase. So it's not the ROI on the CapEx.

Perfect. Got you. Got you. Okay. Understood. And then, the second question, in 3Q, there was a slight drop in same-store occupancy. I mean, could you just talk a little bit about what you think is driving that? Is some of that seasonality, some of that you're aggressively pushing prices, so you kind of expected a slight decline in occupancy?

Yes. One was -- the biggest markets that come to mind are Charlotte and Nashville. So Charlotte was really seasonality with respect to hurricanes and everything else. Just -- it was a tougher operating environment at our deals of those 2 deals. And then for Nashville, we were just trying to really push rate to see how far we can push it.

At this time, we have no further questions in queue.

All right. Well, appreciate everyone's time, and we'll talk to you after the New Year. Thank you.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.